Unemployment rates are falling, wages are rising, and global economies are in an upswing. That's a pretty good macro backdrop for Whirlpool (WHR 182.18, +3.21, +1.8%), which is the world's leading appliance manufacturer. The company's fourth quarter results, though, revealed that Whirlpool still had its challenges.
Net sales increased 1% to $5.7 billion, but decreased 1.6% excluding the impact of currency.
The sluggish sales performance was an offshoot of net sales being flat year-over-year at $3.1 billion in its core North American market and declining 5.4% in Asia to $333 million. Net sales in the Europe, Middle East and Africa segment jumped 1.5% to $1.4 billion and increased 5.2% in Latin America to $905 million.
Whirlpool acknowledged on its conference call that holiday demand was below expectations in several key countries, including the U.S., and that it will focus on reducing obsolete inventory in 2018.
Whirlpool remained solidly profitable, reporting ongoing earnings per diluted share of $4.10 for the fourth quarter. Nevertheless, that was down 5.3% from the same period a year ago on a comparable basis, and below analysts' average expectation, as unfavorable raw material inflation and unit volume declines crimped the company's profit growth.
The latter point notwithstanding, Whirlpool said it was encouraged by solid fourth-quarter exit run rates, and faster than anticipated progress on price/mix and fixed cost reduction.
With that, it has indicated that it expects full-year 2018 ongoing earnings per diluted share to be between $14.50 and $15.50. The high end of that range is below analysts' average expectation, but to be fair, the midpoint of the guidance range translates to expected year-over-year growth of 9.7% on a comparable basis.
The company said it believes its cost reduction initiatives and global price/mix will be a catalyst for significant margin improvements in the coming year.
Investors appear to be placated by that outlook, as shares of WHR are trading higher despite the shortfall in fourth quarter earnings and full-year 2018 guidance relative to consensus estimates.
In turn, with the tariff on imported residential washing machines that was recently announced by the Trump Administration, there is apt to be some hope that Whirlpool is going to see an improved sales performance in 2018 in its core North American market.
At its current price, which is up 8.0% since the start of the year, WHR is trading at approximately 12.2x estimated FY18 ongoing earnings per share.